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Dimethyl ether(DME) from coal as a household cooking fuel in China

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 Articles

Dimethyl ether (DME) from coal as a

household cooking fuel in China
Eric D. Larson
Princeton Environmental Institute, Guyot Hall, Princeton University, Princeton, NJ 08544-1003, USA
E-mail: elarson@princeton.edu

Huiyan Yang
Atmospheric and Oceanic Sciences Program, Princeton University, Princeton, NJ, 08542-1003, USA
E-mail: hyy@princeton.edu

Dimethyl ether (DME) has characteristics similar to liquefied petroleum gas (LPG) as a household
cooking fuel. As such, DME is an attractive fuel for clean cooking. DME can be made from any
carbonaceous feedstock, including natural gas, coal, or biomass, using established technologies.
Given China’s rich coal resources, the production and use of coal-derived DME as a cooking fuel
in China could be attractive. This article reviews characteristics of DME and technology for making
DME from coal. Conditions under which coal-derived DME in China would be cost-competitive
with imported LPG in different regions of China are analyzed.

1. Introduction illustration of the typical air quality in Chinese homes

There were an estimated 1.06 billion people relying par-
tially or exclusively on solid fuels for cooking and heating
in China in 2001, one-quarter of these in urban areas and
three-quarters in rural areas [NBS, 2002]. The consider-
able negative impacts of indoor pollution from cooking
with solid fuels on health and on economic and social
development are beginning to be well documented, as dis-
cussed briefly below and in more detail in other papers
in this issue and elsewhere. In this paper, we briefly dis-
cuss possible clean gas and liquid fuels that might be sub-
stitutes for solid fuels in the future in China. This review
motivates subsequent more-detailed discussion of di-
methyl ether (DME) as a prospective fuel for clean cook-
ing. We examine the technical and economic potential for
producing DME from coal in China and the prospects for
it to compete with imported LPG in different regions of
the country. An analysis of institutional issues that would
be involved in introducing a major new cooking fuel to
China are not included in the scope of this paper.
2. Indoor air pollution and health
Combustion of solid fuels such as biomass and coal in
household cooking in China results in high indoor con-
centrations of health-damaging air pollutants. These in-
clude carbon monoxide (CO), volatile organic carbons
(VOC, including formaldehyde, acetaldehyde, acetone,
and others), polycyclic aromatic hydrocarbons (PAH) and
particulate matter (PM, including black carbon) [Zhang
and Smith, 1999; Finkelman et al., 1999]. Air pollution
levels in Chinese homes often exceed Chinese and World
Health Organization (WHO) limits for ambient outdoor
air. Typical outdoor PM concentrations are 10 % to 100 %
of indoor levels in rural areas [Sinton et al., 1995]. As an
burning solid fuels, Figure 1 shows measured average
peak hourly concentrations of CO and PM10 in 20 homes
burning coal and biomass for heating and cooking in one
village in north-eastern China. Some Canadian and United
States air quality standards are shown for comparison.
Household coal-burning is the largest contributor to
outdoor PM at ground level in all but the most heavily
industrial northern cities of China [Florig, 1997]. Coal-
burning also results in vaporized trace elements, including
arsenic, fluorine, mercury and selenium, when such ele-
ments are present in the coal [Finkelman et al., 1999].
Several hundred million people commonly burn raw coal
in unvented stoves in China [Florig, 1997; Finkelman et
al., 1999].
Health damage to household members from exposure
to stove emissions are substantial [WHO, 2002; Fischer,
2001; Saldiva and El Khouri Miraglia, 2004][1]. Air pol-
lution is estimated to be responsible for more than one
million premature deaths per year in China [Florig, 1997;
Johnson et al., 1997], an estimated 62 % of which are
attributed to indoor air pollution [Johnson et al., 1997].
Globally, 2.7 % of disability-adjusted life years (DALY,
a measure that takes account of premature fatalities and
morbidity effects, i.e., non-fatal health effects) are attrib-
utable to indoor smoke [WHO, 2002].
Household combustion of solid fuels also generates
greenhouse gases, including, but not limited to, CO2 [e.g.,
Smith, 2000; Zhang et al., 2000]. Many VOCs are strong
greenhouse gases, as are methane (CH4) and nitrous oxide
(N2O). Black carbon (BC) is the strongest solar-radiation-
absorbing atmospheric aerosol species, and it is estimated
to have a global warming potential per unit mass that is
two to three orders of magnitude above that of CO2 [Bond

Energy for Sustainable Development l Volume VIII No. 3 l September 2004 115
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Figure 1. Average peak hourly concentrations of carbon monoxide (CO) and particulate matter (PM10) inside homes in the village of Hechengli, Yanbian
prefecture, Jilin province, China. These data are derived from minute-by-minute continuous measurements during periods lasting 24 to 48 hours in
each of 20 homes during November-December 2001 made by Susan Fischer (Ph.D. candidate, Environmental Health Sciences, School of Public Health,
University of California, Berkeley). Note logarithmic scale.

et al., 2004]. Globally almost one-fourth of black carbon
emissions originate in China [Cooke et al., 1999]. Streets
et al. [2001] estimate that over 83 % of Chinese BC emis-
sions come from residential energy use, but that residen-
tial energy accounts for only about 29 % of all
BC-emitting energy use in China, suggesting that there is
considerable scope for reducing BC emissions in the resi-
dential sector.
3. Alternative fuels for clean cooking in China
What fuels could potentially meet future needs for clean
cooking in China? Cooking with liquid or gas fuels is
generally much cleaner than cooking with solid fuels (Fig-
ure 2), in addition to being more energy-efficient (Figure
3) and generally more convenient. What liquid or gas fu-
els might help China meet future cooking energy needs?
Among gas or liquid fuels, LPG is the one most widely
used by households in China now. LPG production in
China nearly quadrupled, from 2.4 to 9.2 million tonnes
(Mt), from 1991 to 2001, while LPG consumption nearly
quintupled (from 2.5 to 14.2 Mt). Imports accounted for
about one-third of consumption in 2001. Given China’s
relatively modest oil and natural gas resources (from
which LPG is derived), the gap between LPG production
and consumption is likely to continue growing, absent any
efforts to change the situation.
Moreover, despite the remarkable growth rates in LPG
use in the past decade, hundreds of millions of people in
China continue to rely on highly-polluting solid fuels for
cooking and heating. Is it conceivable that all of China’s
cooking energy needs could eventually be provided by
LPG?
To answer this question, consider that as of 2001 there
were an estimated 265 million people using solid fuel for
cooking and heating in urban areas, and roughly three
times this many people using solid fuels in rural areas. If
one assumes that the amount of LPG required to meet
cooking needs in China is 35 kg per capita per year, as
suggested by Goldemberg et al., [2004b] then the amount
of LPG needed to replace solid fuel use in both urban and
rural areas for the 2001 population is (1060 million ×
0.035 t =) 37 Mt per year. For comparison, total residen-
tial LPG consumption in China in 2001 was 14 Mt, and
total global consumption of LPG in the domestic sector
was about 97 Mt. Global LPG production was 203 Mt in
2001, up from 147 Mt ten years earlier [WLPGA, 2002].
Thus, while global supplies may be sufficient to meet
China’s future cooking fuel demands, it is unclear whether
supplies will be sufficient to meet China’s demands to-
gether with those of the rest of the world.
Moreover, China’s population, and hence need for clean
cooking fuel, will grow in the future. Since China’s do-
mestic LPG resources are rather limited, and overdepen-
dence on imports is not desirable, it is likely that China
will need clean fuels other than LPG if it is to meet a
long-term goal of complete replacement of solid cooking
fuels.
Natural gas is a clean fuel that is starting to be used
in some households in China. China has approximately
1.4 trillion cubic meters (Tm3 ) of proven natural gas

116 Energy for Sustainable Development l Volume VIII No. 3 l September 2004
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Figure 2. Products of incomplete combustion (PIC) with alternative fuel/stove combinations in simulated cooking tests in China [Zhang and Smith,
1999].

Figure 3. Energy use with different fuel/stove combinations in standardized cooking of meals [Dutt and Ravindranath, 1993].

reserves [Ni and Sze, 1998], and the estimated total re- per year between 1991 and 1999 [LBNL, 2001], reaching
sources are between 47 and 62 Tm3 [as cited by Larson 25 billion m3 (Gm3) in 1999 [NBS, 2002, Table 7.1]. One
et al., 2003], mostly located in remote western regions of analysis projects domestic natural gas production to con-
the country. Domestic gas production grew about 5.8 % tinue growing, reaching 170 Gm3 of output by 2050 [as

Energy for Sustainable Development l Volume VIII No. 3 l September 2004 117
 Articles
Table 1. Physical properties of DME and main constituents of LPG
Property
Boiling point (ºC)
Vapor pressure at 20ºC (bar)
3
Liquid density at 20ºC (kg/m )
Specific density (gas)
Lower heating value (MJ/kg)
Auto ignition temperature at 1 atm (deg C)
Flammability limits in air (vol. %)
Source: International DME Association (www.aboutdme.org).
cited by Larson et al., 2003]. The possibility of major
imports of gas from Siberia into China is also under dis-
cussion, and imports of liquefied natural gas are expected
to grow.
Could potential natural gas resources and distribution
infrastructures meet China’s future needs for clean cook-
ing fuel? If we assume that the amount of natural gas
needed to meet basic cooking needs is 71 m3 per capita
per year[2], then new natural gas supplies of 71 Gm3 per
year would be needed to provide cooking fuel to one bil-
lion urban plus rural people, the number who were cook-
ing with solid fuels in 2001. The amount of gas needed
would grow in the future with population. For compari-
son, the domestic production of natural gas in 1998 was
23.3 Gm3, but 80 % of this was consumed by industry,
and only about 12 % was used in the residential sector
[LBNL, 2001]. This highlights the fact that large point
demands for gas are generally needed to economically jus-
tify the building of major new transmission and distribu-
tion pipelines.
One major new project is the West-East pipeline [EIA,
2003], which began operation this year. The capital in-
vested to build this 4000-km pipeline, which is expected
ultimately to deliver 12 Gm3/yr from Xinjiang province
into the Shanghai area, is variously reported to have
ranged from US$ 5.3 billion [Fu, 2004] to US$ 15 billion
[Anon., 2004b] to US$ 24 billion [Anon., 2004a]. The
greater part of the relatively costly gas is already com-
mitted to power generation or industrial use. While there
may be some residential use of the gas in the future, this
will be limited to urban users because the economics of
distributing gas to dispersed rural users are likely to be
prohibitive. Natural gas would seem to be a partial solu-
tion, at best, to meeting future needs for clean cooking
fuels in China.
Other gases that are used to some extent for cooking
today in China are ‘‘town gas’’ and ‘‘producer gas’’ derived
by gasification of coal and biomass, respectively, and
biogas from anaerobic fermentation of animal and human
wastes. In 2001, about 13.69 Gm3 of town gas were con-
sumed by 43.49 million people in China [NBS, 2002, Ta-
ble 11.7]. Town gas has a relatively low volumetric energy
content (about one-third the energy content of natural
gas), which economically limits its storage and transpor-
tation to relatively densely-populated urban areas. The use
of producer gas is being tested in a handful of village-
118 Energy for Sustainable Development
DME Propane Butane
-24.9 -42.1 -0.5
5.1 8.4 2.1
668 501 610
1.59 1.52 2.01
28.43 46.36 45.74
235-350 470 365
3.4-17 2.1-9.4 1.9-8.4
scale projects in China [Liu et al., 2001]. Producer gas
has an even lower energy content than town gas, further
restricting storage and distribution. Both town gas and
producer gas can be burned cleanly and efficiently for
cooking, but both have safety concerns associated with
the large fraction of carbon monoxide (CO) they contain.
CO is an odorless gas that is toxic to humans, and deaths
by accidental CO poisoning are reported regularly in
China. China has a long history of using biogas as a cook-
ing fuel. In 1996, 1.74 Gm3 of biogas were produced and
more than 5 million households were supplied with biogas
[Gu and Duan, 1998]. Safety concerns with town gas and
with producer gas, and supply limitations with biogas,
will restrict these fuels to relatively minor contributions
to China’s cooking fuel supplies in the future.
Dimethyl ether (DME) is a fuel with physical charac-
teristics similar to LPG in that it is a gas at ambient pres-
sure and a liquid under mild pressure. In this regard, DME
can be used for cooking much the way LPG is used. Im-
portantly for China, DME can be made from any carbo-
naceous fuel, including natural gas, biomass, or coal. With
coal being China’s largest domestic energy resource by
far, there is the potential for coal-derived DME to become
a major clean cooking fuel for China in the long term.
4. DME as a cooking fuel
DME, with chemical representation (CH3)2O, is the sim-
plest ether. It is a colorless gas at ambient temperature
and pressure, with a slight odor. It is used today as an
aerosol propellant in hair sprays and other personal care
products and was formerly used as a medical anesthetic.
DME is produced globally today at a rate of about
150,000 t per year [Naqvi, 2002], but this production level
will increase dramatically in the near future. Construction
of a DME plant with capacity of 110,000 t/yr will be com-
pleted in early 2005 in Sichuan Province [Toyo, 2004].
Natural gas will be the feedstock. In 2002, China’s State
Development Planning Commission approved plans for
the first large-scale coal-to-DME project, to be located in
Ningxia province [Lucas, 2002]. The first phase would
have a capacity of 210,000 t per year, and the second
phase would have a capacity of 630,000 t per year. Con-
struction has not yet started on this plant. Other DME
projects are also under development in China. Both the
Sichuan and Ningxia projects are targeting household
cooking as the primary end-use for the DME. In addition
l Volume VIII No. 3 l September 2004
 Articles
Figure 4. One process configuration for liquid fuels production from coal [Larson and Ren, 2003]
to the Chinese projects, an 800,000 t per year DME-from-
natural gas facility will come on line in Iran in 2006 [Hal-
dor Topsoe, 2004]. Most of the DME product from this
facility will be used as an LPG substitute.
DME is relatively inert, non-corrosive, non-carcino-
genic, almost non-toxic, and does not form peroxides by
prolonged exposure to air [Hansen et al., 1995]. It requires
mild pressurization similar to that required for LPG to be
stored as a liquid. It has a volumetric energy density as
a liquid about 80 % of that of propane, a major constitu-
ent of LPG. Table 1 compares some physical properties
of DME with those of the main constituents of LPG. DME
burns with a clean blue flame over a wide range of air/fuel
ratios [Fleisch et al., 1995; ICC, 2003]. Han et al. [2004]
discuss emissions associated with DME cooking, and
Bizzo et al. [2004] briefly discuss DME-related safety is-
sues.
5. Making DME from coal
DME is manufactured today in small-scale facilities by
catalytic dehydration of methanol [Naqvi, 2002], with the
methanol typically made from natural gas. Technologies
are available for making DME more directly from carbo-
naceous fuels without an intermediate step of methanol
production, but the small size of today’s DME markets
have not justified building direct conversion facilities,
which require relatively large scales to achieve attractive
economics. Should large markets develop for DME as a
cooking fuel in China, it is likely that large facilities
would be built for DME production from coal without
intermediate methanol production (as evidenced by the
planned project in Ningxia province). China already has
extensive commercial experience with modern coal gasi-
fication, the first step in converting coal to DME, in fa-
cilities making hydrogen from coal for ammonia
production [Larson and Ren, 2003]. Gasification proc-
esses are especially suitable for high-sulfur coal, since the
sulfur appears in the gasifier product at high concentration
and thus can be removed relatively easily.
Larson and Ren [2003] have presented detailed process
designs and production costs for large-scale DME produc-
tion from coal, and Celik et al. [2004] have built further
on Larson and Ren’s analysis. Figure 4 illustrates the ba-
sic process arrangement for converting coal to DME. Coal
is first gasified in oxygen to produce a raw synthesis gas
(syngas) containing primarily hydrogen (H2) and carbon
monoxide (CO). The gas is cooled and cleaned before
having its H2:CO ratio adjusted in a water-gas-shift reac-
Energy for Sustainable Development
tor (using a sulfur-tolerant catalyst) to an optimum value
for subsequent catalytic synthesis of DME.
Synthesis of DME from syngas is similar in many
respects to synthesis of methanol, an established commer-
cial process[3]. Methanol is synthesized over a copper-
based catalyst (e.g., CuO/ZnO/Al2O3), with the reaction
represented in a simplified way as:
CO + 2H2 ↔ CH3OH (-90.7 kJ/mol) (1)
DME is produced by dehydrating the methanol (using a
γ-alumina catalyst):
2CH3OH ↔ CH3OCH3 + H2O (-23.4 kJ/mol DME) (2)
By combining some methanol and dehydration catalysts
in the same reactor, reactions (1) and (2) can proceed si-
multaneously, resulting in direct synthesis of DME. The
water-gas-shift reaction is also involved, since methanol
catalyst is also an effective water-gas-shift catalyst:
H2O + CO ↔ H2 + CO2 (-40.9 kJ/mol) (3)
The single-step DME synthesis chemistry can be repre-
sented as a combination of Equations 1, 2, and 3:
3CO + 3H2 ↔ CH3OCH3 +CO2 (-246 kJ/mol DME) (4)
Following the synthesis step, product DME is separated
by distillation from unconverted syngas. In the process
configuration shown in Figure 4, the unconverted gas is
burned in a gas turbine to generate electricity, some of
which is used to meet internal process needs and the bal-
ance of which is available for export. Larson and Ren
[2003] refer to this design as a ‘‘once-through’’ process
configuration, since the syngas passes only a single time
through the synthesis reactor. They describe an alternative
‘‘recycle’’ configuration in which the unconverted gas is
recycled to the synthesis reactor, thereby increasing DME
output per unit of coal input while reducing electricity
production. They conclude that the economics of ‘‘once-
through’’ designs will often be more attractive than for
recycle designs.
The performance of a ‘‘once-through’’ facility for co-
producing 600 MW of DME and 490 MW of electricity
from high-sulfur coal is described in detail by Celik et
al. [2004], who also present production cost estimates for
such a plant if built in the United States at a city gate
where the delivered coal price is $ 1/GJ (or $23.5/t), or
at a mine mouth, where the coal price is $0.5/GJ. Table
2 shows Celik et al.’s results. Additionally, Table 2 shows
estimated production costs for plants built in China, where
l Volume VIII No. 3 l September 2004 119
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Table 2. Levelized production costs (in 2002 US$) for DME in ‘‘once-through’’ process configuration

Plant inputs and outputs[1]

DME output (MW, LHV) 600
Net electricity output (MW) 490
Coal input (MW) 2203
Mine mouth City gate
Coal price, $/GJ (LHV) 0.50 1.0
USA China USA China
[2]
Value assigned to co-product electricity, ¢/kWh 3.95 2.77 4.37 3.18
DME production cost ($/GJ, LHV)
Capital charge[3,4] 11.12 8.05 11.12 8.05
[5]
Operation and maintenance 2.64 1.91 2.92 1.91
Coal feedstock 1.84 1.84 3.67 3.67
Electricity co-product (credit) -8.97 -6.28 -9.92 -7.23
Total production cost ($/GJ, LHV) 6.61 5.52 7.50 6.40
Total, $/t 188 157 213 182
[6]
TOTAL, $/t LPG-equivalent ($/tLPGe) 304 254 345 294

Notes
1. From Table 1 (VENT case) in Celik et al. [2004].
2. These are estimated costs for generating electricity using coal integrated gasification combined cycle (IGCC) technology. The electricity co-product from a DME facility would be
produced with as little pollutant emissions as from an IGCC (or less), so the cost of IGCC electricity is taken as an estimate of the value of the co-product electricity. The IGCC
generating cost for a USA application is estimated using net plant efficiency and overnight capital cost given in Table 2 of Celik et al. [2004]. Further assumptions include interest
during construction of 12.4 % of overnight capital cost, annual capital charge rate of 15 %, annual operating and maintenance cost of 4 % of overnight capital cost, and plant capacity
factor of 80 %. The IGCC generating cost for a China site is calculated from that for the USA by multiplying the overnight IGCC capital cost by 0.664, the China location factor
discussed in Note 3 below.
3. The capital investment required to build this DME-electricity co-production plant for a China location will be less than for a USA location because of lower manufacturing and construction
costs. Williams and Larson indicate that the capital needed for portions of the plant related to DME production will be 0.75 times that for a USA location and for power-generation-related
portions of the plant, the capital needed will be 0.664 times that for a USA location. On the basis of Celik et al. [2004], 63 % of the capital investment in the DME-electricity
co-production facility considered here is for fuel-related investments and 37 % is power-related.
4. Assuming interest during construction is 12.4 % of the overnight cost, a 15 % annual capital charge rate, and 80 % capacity factor.
5. Annual non-fuel operating and maintenance costs are assumed to be 4 % of overnight installed capital cost.
6. This takes into consideration the difference in heating value between DME (28.4 MJ/kg, LHV) and LPG (46 MJ/kg, LHV).

equipment manufacturing and plant construction costs are
lower than for the United States. To estimate capital costs
for the Chinese plants, we use ‘‘location factors’’ from
Williams and Larson [2003], as described in Note 3 of
Table 2. All costs shown in Table 2 are estimated for com-
mercially-mature (sometimes referred to as Nth plant)
technology. Costs for Nth plants will be considerably be-
low costs for the initial few units built. For example, see
Goldemberg et al. [2004a] for an analysis of cost reduc-
tions observed for ethanol production from sugarcane in
Brazil as that industry developed.
Table 2 highlights the importance of the electricity co-
product credit to the economics of DME production. To
ensure that such a credit can be garnered, an electricity
policy will be needed in China that permits independent
power generators to sell electricity to the grid and receive
appropriate remuneration for the power. Reforms are on-
going in China toward such an electricity market [EIA,
2003].
On the basis of the performance reported in Table 2,
we can estimate the amount of direct combustion of coal
that could be displaced by producing DME for cooking.
If cooking with DME is 60 % energy-efficient (as with
LPG) and if cooking directly with coal is 20 % efficient
[Dutt and Ravindranath, 1993], then replacing 1 MJ of
direct coal use would require converting 1.21 MJ of coal
to DME[4]. In making this DME, 0.27 MJ of co-product
electricity would also be produced[5]. If this electricity had
been produced at a stand-alone power plant, it would have
required 0.63 MJ of coal (assuming 43 % coal-to-electric-
ity efficiency). Thus, to deliver the same amount of cook-
ing energy services plus electricity, coal requirements
would fall by about 25 %, from 1.6 MJ with direct com-
bustion to 1.2 MJ with conversion to DME and co-product
electricity.
6. Cost comparisons
In evaluating the potential for using domestically-made
DME as a cooking fuel in China, the most relevant cost
comparison is with LPG imported into China. To facilitate
comparisons, in the following discussion costs of DME
are expressed in terms of equivalent LPG cost ($/tLPGe)[6],
unless otherwise indicated.
6.1. Wholesale LPG prices
Today, some LPG used in China is imported and some
is produced domestically. The price of imported LPG

120 Energy for Sustainable Development l Volume VIII No. 3 l September 2004
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fluctuates with the world crude oil price. During the five-
year period ending in mid-2002, the price for large cargo
shipments of LPG delivered to Japanese ports ranged
from a low of $ 150/t (in mid-1998) to a high of nearly
$ 400/t in late 2000 (Figure 5). Prices for LPG delivered
to ports on China’s sea coast are similar to those for Japan
deliveries[7]. The plant-gate price of LPG produced in
China at petroleum refineries or natural gas-processing
plants is typically at or below the price at coastal termi-
nals [CSTC, 2003]. In cases where LPG produced domes-
tically at refineries or gas-processing plants in inland
provinces is priced below coastal-terminal prices, the do-
mestic LPG may be supplying remote markets for which
imported LPG is not competing because of transport and
delivery infrastructure limitations. In the future, the
greater part of growth in LPG demand is likely to be met
by imports, since domestic oil and gas resources in China
are limited. Thus, as the volume of LPG demand rises,
the price of LPG will increasingly be set by the interna-
tional price.
6.2. Wholesale DME prices
Increased demand for LPG-type fuel might also be met
by DME. The estimated cost of producing DME from coal
at the mine mouth in China is about $ 250/tLPGe (Table
2). Since most of China’s coal resources are located out-
side of the coastal provinces, we may say that the infra-
structure for delivering LPG or DME inside China will
play an important role in determining the relative cost
competitiveness of coal-derived DME vis-à-vis imported
LPG or imported DME. (An alternative potential source
of DME is imported DME made from low-cost,
‘‘stranded’’, natural gas. Naqvi [2002] presents a detailed
cost analysis for the production of DME in the Middle
East and shipped by tanker to the Far East. He indicates
a landed cost for DME of just under $ 300/tLPGe at coastal
terminals on the east coast of China[8].)
6.3. Bulk storage, transportation, and distribution costs
For either LPG or DME, there are three main infrastruc-
ture cost components relating to storage and delivery to
users: (1) bulk storage at a coastal terminal or production
site, (2) transportation in bulk to a bottling facility, and
(3) bottling and bottle distribution to retailers. The gross
margin[9] associated with bulk storage at a coastal terminal
in China is $ 10-15/tLPG [Cui, 2004]. The gross margin
for bottling plus retailing of 15-kg or 50-kg cylinders is
$ 60-100/tLPG [Cui, 2004]. This latter cost includes retail
distribution within 50-70 km of the bottling facility.
The cost of bulk transportation depends on whether the
transportation is by tanker truck, rail tanker, or pipeline.
For long distance transport ( 500 km) of sufficiently large
volumes of LPG or DME, a pipeline is likely to be the
least costly option. For shorter distances, rail transport
would likely be less costly than truck transport, but truck
transport will be the mode of choice where rail is not
available. The cost per tonne for truck transport of LPG in
China for distances less than 1000 km is estimated to be
Ctruck = 9.83 + (0.051×D) (5)
where Ctruck is in $/t and D is the transportation distance
in km[10]. Equation 5 predicts transporting LPG a distance
of 1000 km by truck would entail a cost of $ 60.8/t or
$ 0.061/t-km. For comparison, the levelized cost for de-
livering LPG through the 1246-km Kandla-Loni pipeline
(running between the states of Gujarat and Uttar Pradesh,
India, and commissioned in 2001), is an estimated
$ 0.014/t-km[11].

Figure 5. Quarterly-averaged spot price for propane landed at Japanese port [WLPGA, 2002] and quarterly-averaged international crude oil price [EIA,
2004]. Original data in current US$ values have been converted to constant 2002 US$ using the US GDP deflator [JEC, 2004]. Propane prices are
used in our analysis as a surrogate for LPG prices. The main components of LPG, butane and propane, have comparable prices and heat content per
tonne. Based on these data, the correlation (R2 = 0.79) between world oil price, Poil (in $/bbl, bbl: barrel), and Japan spot propane price (in $/t LPG),
expressed in constant 2002 US$, is given by PLPG = 94.4e(0.0463×Poil).

Energy for Sustainable Development l Volume VIII No. 3 l September 2004 121
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6.4. Cost comparisons
Figure 6 shows DME costs to users (in $/t) by cost com-
ponent for mine-mouth production and for city-gate pro-
duction. Production accounts for the largest share,
followed by bottling/retailing. Bulk storage is a relatively
small cost component, and transport cost depends on dis-
tance[12]. Costs are shown for three transport distances.
DME made at the mine mouth and trucked 500 km to a
city would cost slightly more than DME that is made at
the city gate and not subjected to bulk transportation.
Figure 7 shows the cost to users of imported LPG and
of coal-derived DME as a function of the world crude oil
price and the assumed transportation distance and trans-
portation mode. Several observations are noted.
1. In coastal cities, imported LPG will be preferred to
coal-derived DME transported 1000 km by truck from
coal-rich inland provinces when the oil price is under
$ 30/bbl (as indicated by the point A in Figure 7).
(1 bbl or barrel of oil = 0.1364 t)
2. For coal-rich provinces, which are principally inland
provinces, DME made locally would compete at rela-
tively low oil prices with imported LPG, which would
need to be transported a considerable distance. For ex-
ample, assuming LPG is transported 1000 km by truck,
local coal-derived DME would be competitive for oil
prices below $ 20/bbl if no long-distance bulk trans-
portation of the DME were required (B).
3. For inland areas more distant from coal resources,
DME from coal transported by truck 1000 km from a
coal-rich area would be preferred to imported LPG
transported by truck 1000 km from the coast when the
Figure 6. Estimated cost from coal of DME delivered to retail consumer in China. The cost is per tonne of DME. Multiply by 1.62 to convert to cost
per tonne of LPG equivalent
122 Energy for Sustainable Development
oil price is above $ 26/bbl (C).
4. For long-distance transport of LPG or DME in the long
term, pipeline would be less costly than truck transport
for sufficient volumes. (In the short term, for shorter
transport distances, and/or smaller volumes, pipelines
will be more difficult to implement and/or more
costly.) If imported LPG were to be transported 1000
km by pipeline, it would compete with DME made
locally from coal at an inland location when the oil
price is below $ 23/bbl (D). Similarly, if DME were
transported 1000 km from an inland site by pipeline
to a coastal city, it would compete with imported LPG
when the world oil price is above $ 26/bbl (E).
7. Coal and income distributions in China
The above cost estimates for imported LPG and domestic
coal-derived DME can be considered in the context of the
distribution of coal resources and per-capita income of the
rural areas of the provinces of China. Rural areas are
where the majority of the 1.06 billion people live who
rely today on biomass or coal to meet cooking energy
needs, and thus where greater access to clean fuels is most
needed.
Figure 8 shows that nearly all of the coal-rich provinces
are located away from the coast, so that imported LPG
entails transportation costs to reach those provinces. Thus,
for most of the coal-rich provinces, the cost analysis in
the previous section suggests that DME will be cost-com-
petitive with imported LPG when the world oil price is
higher than $ 20/bbl to $ 26/bbl.
Also, the provinces with the lowest average per-capita
l Volume VIII No. 3 l September 2004
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Figure 7. Estimated costs for DME and imported LPG as a function of world oil price and for different truck transportation distances to market. ‘‘Imported
LPG, coastal city’’ and ‘‘DME local’’ include no bulk transportation cost. DME prices are shown unvarying with world oil price, as DME prices are
assumed to reflect production costs, which will not change significantly with oil price since the price of the feedstock coal is unlikely to vary significantly
with oil price.
rural incomes are the richest in coal resources (Figure 9).
The prospective competitiveness of coal-derived DME
with imported LPG provides an opportunity for these
provinces to add value to their coal by producing DME
both for local consumption and for export to other prov-
inces. The income and related economic activity that
would be generated in this fashion are potentially far
greater than what could be generated by simply exporting
the energy raw material (coal in this case) out of the prov-
ince. The West-East pipeline mentioned in Section 3 is an
example of exporting the raw material (natural gas) with-
out adding much value. Thus, the export of DME made
from coal would be consistent with the objectives of the
Chinese government’s Western Region Development Pro-
gram (see www.chinawest.gov.cn).
On the basis of the analysis in this paper, coal-derived
DME will likely be competitive with imported LPG, even
when world oil prices are relatively modest. However, un-
til a large DME market develops, imported LPG is likely
to set the market price for clean cooking fuel. Thus, when
the world oil price is sufficiently high, there will be a
large difference between LPG price and DME cost (Figure
7), resulting in potential ‘‘windfall’’ profits for DME sup-
pliers. Since clean cooking fuel (whether DME or LPG)
may be unaffordable for many low-income households, a
windfall-profits tax might be introduced on DME suppli-
ers, with the tax revenue used to subsidize clean-fuel pur-
chases by the poorest households.
8. Conclusions
As the demand for clean cooking fuel grows in the future
in China, the fraction of LPG that China imports will also
grow, because China’s domestic oil and natural gas re-
sources are limited. Imported LPG prices track interna-
tional oil prices, so, as oil prices rise in the future,
importing LPG will become an increasingly expensive
proposition for China. Moreover, as Chinese LPG demand
grows, global competition for available supplies of LPG
will intensify, ultimately contributing to higher interna-
tional LPG prices. High LPG prices will limit the extent
to which imported LPG can meet China’s domestic needs,
especially the needs of inland provinces where added
transportation costs are involved.
DME has properties very similar to LPG as a cooking
fuel, and DME is potentially much more widely available
than LPG in China because it can be manufactured from
coal. The analysis in this paper suggests that coal-derived
DME in China could be competitive in many regions of
China with imported LPG even at relatively modest world
oil prices.
For coal-derived DME to become a viable commercial
household fuel in China will require successful demon-
strations of the production, distribution, and utilization of
DME. Planning for at least one major coal-DME produc-
tion facility is at an advanced stage in China, and some
significant testing of DME as a household fuel has already
taken place there. The most economical approach to

Energy for Sustainable Development l Volume VIII No. 3 l September 2004 123
 Articles
Figure 8. The provinces of China, with coal-rich and low-income provinces highlighted. (Original map from Perry-Castañeda Library Map Collection,
University of Texas, Austin.)
making DME from coal will be at facilities using ‘‘once-
through’’ process designs that produce DME and an elec-
tricity co-product. The ability of such facilities to sell the
electricity at appropriately remunerative prices is a re-
quirement for the most attractive economics. Thus, na-
tional policies that ensure that independent power
producers will be able to sell electricity to the grid would
facilitate the growth of a coal-DME industry in China.
With co-production of DME and electricity, there would
be significant savings (about 25 %) in primary coal
needed to meet a given demand for cooking energy serv-
ices plus electricity.
Notes
1. Epidemiological studies suggest that acute respiratory infections (ARI), chronic obstruc-
tive pulmonary disease (COPD) and lung cancer (especially from coal smoke) are re-
lated closely to household solid fuel use (see, e.g., [Smith, 2000]). Globally, indoor
smoke from solid fuels is estimated to cause about 36 % of lower respiratory infections,
124 Energy for Sustainable Development
22 % of COPD and about 1.5 % of lung cancers [WHO, 2002]. Other symptoms, such
as otitis media (middle ear infection -- the middle ear is connected to and often affected
by upper respiratory infections), nasopharyngeal and laryngeal cancer (the pharynx and
the larynx are parts of the upper respiratory system and are affected by inhaled pollut-
ants), asthma, and tuberculosis are also related to coal- and biomass-burning [Ezzati
and Kammen, 2002], but have not been studied as intensely as the first three types.
Perinatal conditions and low birth-weight, diseases of the eye (such as cataract and
blindness), and heart diseases are loosely related [Smith, 2000; Ezzati and Kammen,
2002].
2. To provide useful cooking energy of 50 W/capita [Goldemberg et al., 2004b] from natural
gas, and assuming a stove efficiency of 0.6 and a natural gas heating value of 37
MJ/m3, the gas requirement would be 71 m3/capita/yr.
3. Globally, most methanol is produced today from natural gas, but China produces most
of its methanol (3.3 Mt used in 2001) from coal [Larson and Ren, 2003].
4. 1 MJ of direct coal in cooking produces 0.2 MJ useful cooking energy. To provide 0.2
MJ of useful cooking energy from DME would require 0.2/0.6 = 0.33 MJ of DME. From
Table 2, making 0.33 MJ of DME would require 0.33/(600/2203) = 1.21 MJ coal.
5. The fraction of coal energy converted to electricity (from Table 2) is 0.222.
6. The cost of DME in $/t is converted to an LPG-equivalent cost by multiplying by 1.62,
the ratio of the lower heating values of LPG (46 GJ/t) and DME (28.4 GJ/t).
l Volume VIII No. 3 l September 2004
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Figure 9. Estimated total recoverable coal resources by province [LBNL, 2001] and annual average rural per-capita income for each province [NBS,
2002]
7. We do not have time-series data for the landed price of LPG at China’s coast, but Cui
[2003] indicated that in April 2003, spot prices per tonne for propane landed in Japan,
Korea, Taiwan, East China, and South China were all within $ 2 of each other.
8. For a plant with the capacity to produce 1.3 Mt/year of DME (1183 MW DME,LHV) from
natural gas at a Middle East or Persian Gulf location, Naqvi indicates a total installed
capital cost of $ 386.5/tDME -year, natural gas consumption of 42.85 GJ/t DME , and non-
fuel O&M costs of $ 40.8/tDME. For a gas price of $ 0.47/GJ ($ 0.5 per million BTU)
and a 15 % annual capital charge rate, this gives a total levelized production cost of
$ 119/tDME . Naqvi indicates shipping 12000 km (round-trip) will cost $ 64.3/tDME, giving
a total delivered cost of $ 183.3/t DME , or $ 297/tLPGe.
9. The ‘‘gross margin’’ associated with bulk storage is the difference between the wholesale
price for LPG leaving the storage facility and the price paid for the LPG when it was
received by the facility. Likewise, the gross margin on bottling/retailing is the difference
between the retail price for the LPG and the price paid for the LPG when it was received
at the bottling facility.
10. This relationship is derived from trucking cost estimates per t-km (including loading and
unloading of the truck) provided by Feng [2003]: RMB 0.8 to 1.0 for distances below
200 km; RMB 0.6 to 0.8 for distances between 200 and 500 km; and RMB 0.5 to 0.6
for distances over 500 km. A conversion factor of 8.2 yuan RMB to US$ has been
applied.
11. The capital investment for this pipeline was an estimated 12.3 billion rupees (about
US$ 250 million) for a capacity of 2.5 million t/yr [MoP&NG, 2004]. Assuming 90 %
capacity utilization and a 12 %/yr capital charge rate, the levelized capital cost for this
pipeline is 250×0.12/(2.5×0.9×1246) = $ 0.011/t-km. Kler et al. [2000] estimate annual
operating and maintenance (O&M) costs for a pressurized (5.4 MPa) methanol pipeline
to be 3.5 % of capital investment. Assuming this percentage for the Kandla-Loni pipe-
line, the O&M cost for it would be $ 250×0.035/(2.5×0.9×1246) = $ 0.003/t-km. The
total cost for pipeline transport in this case is, therefore, $ 0.014/t-km.
12. In calculating coastal storage costs, bulk transportation costs, and bottling/retailing costs
we assume capacity is limited by liquid volume (of LPG or DME). Thus, to calculate
the cost for DME storage or transportation in $/tLPGe from a cost for LPG storage or
Energy for Sustainable Development
transportation in $/tLPG, we multiply the original $/tLPG by Rdensity and by Rhv, where
Rdensity is the ratio of the volumetric density of LPG liquid (0.577 t/m3) to that of DME
liquid (0.668 t/m3) and Rhv is the ratio of the lower heating value of LPG (46 GJ/t) to
that of DME (28.4 GJ/t).
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As regular readers are aware, Energy for Sustainable Development has published
special issues on several subjects during 2000-2003. Some more special issues
are being considered and planned. In addition, we have in the recent past received
useful suggestions for special issues, especially based on conferences or
collaborative projects, from our friends in the energy community. We welcome
ideas for special issues from readers. Such suggestions should contain details of
the likely papers that could go into the issue and of the probable guest editor(s).
Suggestions should be sent to:
Amulya K.N. Reddy
Publisher and Editor, Special Issues, Energy for Sustainable Development
25/5, Borebank Road, Benson Town, Bangalore-560 046, India.
E-mail: ieiblr@vsnl.com
126 Energy for Sustainable Development
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l Volume VIII No. 3 l September 2004